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Asymmetric Pricing, Relationship Norms and the Dual Entitlement Principle

Associate Professor Haipeng (Allan) Chen, Mays Business School, Texas A&M University

23rd Jun 2011  10:00 am - 11:30 am Room 214/215, H69 - Economics and Business Building

Firms are often seen as more likely to pass through cost increases than cost decreases to consumers. One rationale for why firms are able to sustain this practice of asymmetric pricing is based on consumer fairness perceptions governed by the principle of dual entitlement. Examining the practice of asymmetric pricing through the theoretical lens of relationship norms, the present research proposes that the degree to which the dual entitlement principle is endorsed as the community standard of fairness is influenced by the type of buyer-seller relationship and corresponding relationship norms. Specifically, to the extent that asymmetric pricing protects firms' profit at consumers' expenses, the pricing practice may be perceived as less fair in a communal (vs. exchange) relationship as it violates the communal norm of concern for consumers. In three studies we provide support for this effect by manipulating the type of buyer-seller relationship through priming (study 1), industry (study 2) and culture (study 3). We conclude by discussing the theoretical and managerial implications of our results.